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Should You Buy Term or Whole Life Insurance?

by Martha Simmonds

Are you struggling with the common dilemma about whether to purchase permanent or term life insurance? You are not alone. Every year, huge numbers of working adults finally decide that getting long-term financial protection for their families is the smart thing to do. What they often don’t know is which kind of policy is the one that best suits their preferences and particular financial situations.

The way to approach the classic term vs permanent riddle is to begin by learning the key differences between the two variations. Next, acquire a basic understanding of how to sell a policy, how to assess your own needs, and how to size up the overall pros and cons of the choices before you. Here’s a short synopsis of how to reach a reasonably informed decision.

Key Differences

To put it simply, term is often referred to as pure coverage because its main feature is a death benefit paid directly to a beneficiary. Permanent or whole policies do that too, but they also carry a cash value from which the owner can borrow. Of course, the other main difference is the length of coverage.

With a 20-year contract, for example, you’re protected for a specific number of years, and that’s it. With permanent protection, the contract is in effect as long as you pay the premiums. For those on a budget, it’s important to know that the prices are quite different, too. For example, term policies often cost one-tenth (or more or less) than their permanent counterparts.

You Can Sell Any Kind of Policy

There’s a common myth that you can’t sell term policies via life settlements. The fact is that you can, as long as you can locate a willing buyer. The key thing to remember about life settlements is that the buyer is more interested in the final benefit amount than most anything else.

Once you understand what the process is, you can offer your policy for sale and get a cash payout for it. To get started, review an online guide that includes everything you need to know about selling an insurance policy via a life settlement.

Evaluate Your Needs

Unfortunately, some get so wound up in trying to decide which is the best choice, they struggle to focus, and in turn they ignore one of the most essential parts of the question, their own financial situation and needs. For instance, if you are on a limited budget, you’re usually best-off getting term coverage because of its affordability.

Likewise, if you have substantial income, several children, a mortgage on your home, and other financial obligations, permanent policy options are likely your best bet.

Pros and Cons of Each Type

Term is easy to buy, costs little, and can be an excellent way for young working people to get the security they need until their incomes go up and their financial obligations expand. At this stage, if you struggle to determine what percentage of income should go to rent due to low earning totals, you may also struggle to budget in expensive life insurance premiums.

Permanent options are ideal for middle-aged adults with enough income to pay higher premiums. On the downside, term runs out when the time is up and you’re left with no protection. Permanent coverage can be costly and might be hard to fit into a modest budget.

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